patrick.net

A Pocket Listing is a slang term used in the real estate business. An agent lists a property for sale and does not enter it into the MLS system for several days, keeping it in his "pocket" so other agents will not know the property is for sale. This allows him to show the listing to his customers without competition from other buyers. The seller is unaware that the property is not being offered to ALL buyers and may accept a lower offer than they would have gotten if the property had been exposed to ALL buyers. This can be avoided by specifying that the Listing Agent provide you the MLS identification number within 24 hours of listing the property.
~Real Estate Glossary Web Site~

Also see:
http://realtytimes.com/rtcpages/20041001_pocketlistings.htm

RE folks continually forget that "There is no honor among thieves."

Notice the "Seller beware" spin on the above definition of Pocket Listings. Ultimately, the seller's agent can control exposure and may even target certain potential buyers without the interference of local competition and more educated buyers.

Of course, I could have this all wrong….

Randy H. Says:

> Someone Please Explain “Pocket Listings”

Most real estate firms require every signed listing agreement to go in to the internal company system and the MLS as soon as the agreement is executed.

The term “pocket listings” originally came from agents trying to find a buyer and get both the listing and sale side of the commission with the executed listing agreement “still in their pocket” while they were on their way back to the office to get it in the system (it will often take some agents a couple weeks to “get back to the office”).

The term “pocket listing” will also often mean that an agent knows an owner will sell a property but they do not have an actual listing agreement and the property is not officially on the market (and at times mean a “piece of a listing” meaning the actual listing agent has promised part of the list side fee).

> And aren’t pocket listings technically against the
> CAR’s so called “code of ethics”?

I have no idea, but if I had a dollar for every time a Realtor violated the “code of ethics” you would see my name ahead of Gates and Buffett on next year’s Forbes 400…

> And even more so, why the hell would any buyer
> even be interested in this?

It is easy to convince people that they are getting a deal if they buy a home not listed in the MLS, but there is no reason not to be interested in a property not officially listed for sale.

> This particular home sold for $1m a in mid 2005, but only
> 0.5m in 1999. Given the listed comparables in the neighborhood,
> I’ll bet they’re easily trying to get $1.4-1.5m. But this is Tamalpais
> Valley, not exactly prime South Marin.

Sounds like you should send an e-mail to Marinite at the Marin Housing Bubble Site since he seems to know a lot about Tam Valley.

> (I’m withholding the Zillow link for now, until I figure
> out if there are any legal repercussions to the owners.
> They’re actually reasonably nice folks, which is itself
> a rarity in Marin.)

There is nothing illegal about putting a home on the market without putting it in the MLS (or putting a sign on the lawn)…

So...

"Pocket listing" is an unethical way for Realtors to profit from information asymmetry in the inefficient, opaque RE market.

And...

"Pocket Congressman" is an unethical way for banksters to profit from information & power asymmetry in the inefficient, opaque political/influence system.

If Marin is full of jerks, why do you even want to buy there Randy? I briefly considered Marin, too, but there are very few Asians there, so my wife was uninterested. I like the vibe in Mill Valley, but the rest of Marin I could do without.

It is very nice on the coast, though, might be worth the neighbors.

I don't think a pocket listing could be illegal, since Alexander Clark advertises them in his newsletter, which goes out to thousands. Here is an example of one he posted recently:

SFpocketlistings

What is a pocket listing? A property that is not in MLS or "on" the market, but the seller is willing to sell to a ready and able buyer.
-Nob Hill Top floor Victorian condo in a 2 unit building, featuring 2 bdrms, 2 baths, bonus room that can be office or nursery, combo living room/dining room w/decorative fireplace, hardwood floors throughout, eat in kitchen and leased parking about 1.5 blocks away, common roofdeck with fantastic north bay/GG bridge views and a private laundry room on the ground level. Tax records show appx 1000 sq feet. Price is $829,000.
If you, or anyone you know, is interested in this property, please contact your sfnewsletter provider for details

Well... regardless, it's a practice that needs to be stopped. On one hand the realtors are running the MLS in cartel fashion (when it suits their purpose) and "off the books" when THAT suits your purpose.

They black ball lowballers and FSBO's so this shouldn't surprise anyone. I suppose just having this option (with the threat of like a $500 fine dangling over their head) helps them keep their "edge" and connection to the criminal element.

God that must be heady! Driving around town in your Lexus with that listing agreement in your hip pocket, cell phone's a'ringin'. The prospect of a double commission? Where's my old GF's number?!

@Jon,

"When they recieve complaints"

I think that's the key right there. Even better educated people can't be expected to know what a "pocket listing" is or how it might affect them. I know for a fact that the realtor's pitch goes something like this;

"If you're ever of a mind to sell this place call me right away, I know several people that would snatch it up in heart beat" yada yada.

:) (That's seller w/ $ signs in eyes)

Recall that there is a difference between a real estate agent and a realtor. RE agents are bound by the law, while Realtors are additionally bound by the code of ethics. If they violate the code of ethics there’s an arbitration committee, penalties, etc. If they do enough bad stuff, they lose their “realtor” designation and become “just” real estate agents.

Jon,

If real estate agents or realtors really were "bound by law" or a strict code of ethics in any meaningful way (as in, you might have to pay fines, lose your license or go to jail), would the agent/MLS abuses we've seen over the last several years have been so common?

IANAL, but my understanding from people who are (and previous discussions here about "fiduciary responsibility") is that, unlike stockbrokers, Realtors are not “real” fiduciaries. Basically, they cannot be prosecuted for any breach of a professional group's “code of ethics”, such as the NAR's, CAR’s or any other. They are not federally regulated/policied the way stockbrokers are (SEC, Sarbox, etc.), so compliance with any rules/ethics (barring outright lawbreaking) is strictly voluntary.

In Sunnyvale, on Homestead, as you are driving from Wolfe to De Anza, just before Blaney, there were some new house being constructed on the right side of the street. (Side note : It's opposite the pizza place which is one of the rare places where you can get a Chicken Tikka Pizza and a Paneer Pizza.)

I drive that route often. There were 8-9 houses being constructed. I even remember seeing a board for some RE agency when the houses were under construction. But it was soon taken off. I don't remember seeing any open house or any potential buyers looking around. It was just very silent. Now suddenly, these houses are occupied. So I guessed must be direct sales - and could have been pocket listings.

I am not sure why the seller (whoever it is, previous owner or a builder) would do that. There would have been a bidding war there. Or maybe the buyers already paid enough premiums so the seller didn't really care. It just felt swift and weird.

@HelloKitty

The house has been "showing" for a couple of weeks now, and traffic has steadily picked up. It just happens that I've been working from home the past few days so I've been able to keep an eye on things. In fact, I'm pretty sure they were showing it over a month ago, as that's around when it was staged and the owners started becoming very scarce and sans children when they were around.

When I first moved to Marin a little over 2 years ago the agent who sold our Belmont house tried to hook us up with an "old veteran" in Mill Valley. She obviously knew what we'd sold for, so she knew we could afford much more than I'd told her we were willing to. Anyways, after a couple short interchanges I objected with something like "but there's plenty of nice stuff I'm seeing on MLS at my price", to which she responded "and if you want to buy a house you actually want in a neighborhood you actually want, then you'll never see it on MLS, that's the way things work up here".

Shortly after that is when I started running numbers in Excel and writing stuff on Patrick.net. But I will say that of the people I know who've bought here recently a good number of them bought "pocket listings".

HARM,

My issues where PL's are concerned is that if we were going to have a system where everybody knows "it's WHO you know" then fine!

If we're going to have a level playing field where all the players are known to all the other participants, well I'm just fine w/that too. It's when they tout this "code of ethics" (which btw I've never actually seen) and yet "work" the market to their benefit that I have to cry foul.

@Jimbo

I'd like to say that Marin isn't full of jerks because I've got some friends up here and I've met some nice folks, mostly through my son's school. But Marin suffers from (a) way too much homogeneity and (b) way too much unearned (but still newish) money. It's like the worst of both worlds. Money that's new enough that it doesn't know how to behave with tact and class, but old enough that it has forgotten what it took to earn it, or what everyone else on the other side of the Richmond Bridge is going through.

Would we live here if given the choice?

No. I liked the Peninsula much better. Given my druthers, we'd probably be in Menlo Park.

(Living here also means I have to drive through the City just to go to meetings down in the Valley, which is a real bite in the ass.)

Marin still has the best natural environment though.

I am fine with jerks. I can behave like one if I have to.

"archaic and inefficient"

Incredible isn't it? It's 2007, we're in the technology center of the universe and we're still tolerating RE transactions to be conducted like a ladies bridge club.

No offense ladies. :)

Speaking of Marin (fresh post from Ben's blog):

The Marin Independent Journal: “A prominent real-estate economist predicts that troubles will persist in the California housing sector throughout the year, but she said Marin’s unique market is weathering the downturn better than other areas.”

“‘It’s God’s country, what can I say,’ (said) Leslie Appleton-Young, chief economist for the California Association of Realtors. ‘When is the 30 percent decline in Marin County’s market going to happen? Not in my lifetime.’”

“Marin’s foreclosure activity nearly doubled in the fourth quarter of last year. By comparison, notices of default were up 134 percent in the nine-county Bay Area over the same period, DataQuick reported.”

“Statewide, default notices increased 145 percent year-over-year. In Merced, Placer and Santa Barbara counties, the increase exceeded 250 percent.”

“Recent foreclosure activity has apparently been brisk in Marin. According to Yahoo, dozens of foreclosures have been listed in Marin in the past two weeks alone.”

The problem with Marin foreclosures is they exert very little downward pressure on prices. When something here forecloses it never even hits the ground before it's snapped up, usually by an investor who then turns around and sells it through an agent for the "market price". So unless there's a literal flood of foreclosures, their price is not a marginal price setter.

(I refer earlier to intense, boring, debates I had with others about why marginal pricing so often does *not* happen in real estate. Just because a comparable home sells for 30% below another in foreclosure does not mean the owner of the other house will sell for 30% cheaper, nor does it mean that buyers expect a 30% discount).

This is cool.

NYT has come out with their Buy vs Rent article, and it has an interactive tool to figure out using your numbers. Nowhere near as sophisticated as the Bubblizer. But it is far more simple to use and understand. They oversimplify a lot things, but make it accessible to the average Joe.

http://tinyurl.com/2ysc27

I entered some typical BA numbers. 1M for the house, 10% down payment, 6.5% mortgage rate, 5% annual appreciation, 2500 rent and 5% rent increase every year, 1.25% property taxes.

It says, buying is better than renting after 17 years.

Jon,

I agree. There is a world of difference between "unethical" (but legal) and unlawful activity. Right now Realtors and agents (just like mortgage lenders) are basically being asked to self-police, while most arguably unethical practices are not illegal. And the results speak for themselves.

We need a Sarbox for the banksters, mtg. brokers and Realtors (preferably something a lot better than the Frank-Bachus bill).

It says, buying is better than renting after 17 years.

Where is "theotherside" when we need her.

Please anyone reading take note, after a couple of us, myself included, finally [again] rebuffed her calculations she *poofed*.

By my account, she'll reappear in about 3-5 threads and post the same "it's always a good time to buy" calculations. Maybe then we can point her to the NYT.

inefficient, opaque ... market

Just to culture-jam the neoclassical economists, I don't know that any market can be 'efficient' really, only processes can be efficient, e.g. my engine is more energy-efficient that yours, my automated logistics system is more man-hour efficient than yours, etc. As for 'transparency', who requires that in business, except in the textbooks? Transparency is just a codeword meaning I don't want to get ripped off too much while I'm conducting business, if I order a widget at 3c I expect to get a widget at 3c. But do the captains of industry like having their salaries published all over the papers? Do they like having every practice exposed? e.g. when they buy blood diamonds from Sierra Leone at $1 each? From the realtors and MBs point of view, the RE market is very 'efficient' at putting money in their pockets, that's why they like it the way it is... I don't think markets are particularly virtuous, and the ascribed holy grails of efficiency and transparency in themselves are not particularly virtuous -- they're at best a means to an end...

Randy,

Yes, that pretty much coincides with my opinion of Marin, too, but I have never lived there, just visited. The natural beauty is outstanding, but other than that, I was not particularly impressed. There are of course, some nice people anywhere.

“and if you want to buy a house you actually want in a neighborhood you actually want, then you’ll never see it on MLS, that’s the way things work up here”.

I wonder if there is a sort of slyly unstated redlining going on here. You mentioned before that you were threated with being blackballed if you continued in your behavior, this is probably part of it, too.

isn’t this a free country, why can’t someone list or not list their home however the hell they want to. who are you to decide that it is “not nice” and “not according to the rules” to do what you can to sell a house?

I agree.

why is it unethical for the agent to want to “doubledip”? umm, don’t we all want to make more money? if a seller doesn’t like that, then why the hell do they sign with the agent under those rules?

Greed is amoral. However, it would be unethical if the agent breaks the contract.

I’m not an agent, nor do i particularly care for agents, but I do believe in the free market and personal liberties!!

Excellent!

@SoftestLanding

Rare that I am accused of not being capitalistic enough.

To your point. No. Being able to list their home however the hell they want to is anathema with the concept of a free market. Might I suggest a short study in "market asymmetries".

Free markets do not function to maximize efficiency and discover optimal pricing when asymmetries exist. The situation we are discussing is a classic information asymmetry. The situation gives some buyers and sellers preference over others -- preferences which are not determined by the free market but by personal incentives which may not be aligned with market optimization.

Think of what the stock market would be like if we applied your logic. We'd have nothing but insider trading, and no one would make any money except for those who were part of the in-club.

If we apply Objectivist principals, upon which modern capitalism is theoretically based (which thereby excludes market fundamentalist cranks) then a free market requires that there is no coercion. In the face of coercive pressures, markets to not function properly or for the benefit of the economy.

Pocket listings are a form of coercion because they function to exclude some would be buyer participants and to deceive both buyer and seller participants.

I refer you to DinOR for a lecture on the proper purpose and function of regulatory regimes which ensure fiduciary responsibility in financial transactions. And I remind you that without any regulatory regime you do not have a free market, you have an anarchy. Anarchies are not "naturally" tamed not by rational market functions, but by coercive forces such as cartels, syndicates, cleptocractic organizations and deceptions which simply fill the void.

*principles.

Pocket listings may not be in the sellers' best interest. They need to understand that and take steps to ensure full martket participation.

My favorite thing about that kind of system are the large murals of the leader everywhere !!

Like naming everything under the sun "Ronald Reagan"?

COMPLETELY off topic, but I just got the funniest unsolicited mortgage e-mail! Watch out for the Magic Mortgage Man!

Seriously, it's funny now that Mortgage brokers are starting to stab eachother in the back over bad lending practices. Before, they'd never mention it so nobody would stab them for THEIR lending practices.

Now that the pie is getting smaller by the day, they'll be gutting eachother like fish trying to keep their slice from disappearing.

Like naming everything under the sun “Ronald Reagan”?

I completely totally utterly fail to understand the objection. In India, every village/town/city/metro has a few things named after Mahatma Gandhi. I have enormous respect for him, but even I got tired of seeing his name everywhere.

So complaining about naming a few things Reagan, dude, you have NO idea how bad it can get.

What I did find surprising in US was that the Kennedy clan being treated as some sort of unofficial first family.

COMPLETELY off topic, but I just got the funniest unsolicited mortgage e-mail! Watch out for the Magic Mortgage Man!

O M F G ! !

Muggy may be on to something. It's looking more and more like I really have enough material for an entire series of novels. You just can't make this shit up.

All I can say is that the pic in that ad HAS to be a blog topic pic soon.

I'd say Marin County is perhaps the most reasonably priced compared to Santa Clara, which is not as bad as San Mateo.

I am not familiar with Marin, but I know Larkspur and Tiburon are prime Marin. Based on what I see from ziprealty, a house with a similar price in South Valley will more likely to be inferior to the one up in Marin because
1) the Marin home in $1.5M range is likely have stunning views (yep, literally million-dollar view). View is not guaranteed in this price range in Santa Clara.
2) the Marin home is more likely more unique in the architectural style. In South Valley, $1.5M means a better location with an extremely boring ranch style recently updated with the prototypical graniteel on a decent lot.

San Mateo is the worst. I have no idea what kind of idiot will pay $1.5M to buy a typical home up in San Mateo county. I think Marin is likely to hold its price better than SC and SM.

My theory is that you're going to see a lot of FSBO pop up in the Bay Area. I remember searching for "FSBO" on craigslist a few years ago and you could count on maybe two listings for some crappy Tahoe cabins. Now that people are upside down to the tune of a realtor's commission (at least), you're going to see some creative selling in place of all that creative financing...

When you're bored, go to craigslist and search for any of the following terms:

"FSBO"
"sale by owner"
"not on mls"
"principals only"
"no agents"

Or my favorites:
"short sale"
"bank owned"
"REO"

You get the point...

I like the view of this Milpitas home. Seriously.

http://tinyurl.com/2pnctp

I think Marin is likely to hold its price better than SC and SM.

I agree.

Of course, I love the view in Marin across the San Pablo Bay in the morning.

View is better than ANY school district. At least you get to look at it.

Peter P,

when spring is over, that house in Milpitas will be surrounded by dead brown grass. I am sorry, a million-dollar home in Milpitas is just an oxymoron, let alone a 2-million-dollar-home.

I am sorry, a million-dollar home in Milpitas is just an oxymoron, let alone a 2-million-dollar-home.

I like the Spring Valley area though. Just please do not let me see any "city lights" view.

I completely totally utterly fail to understand the objection. In India, every village/town/city/metro has a few things named after Mahatma Gandhi.

Yeah but that was after he died.

They started trying to name all sorts of stuff after Reagan while he was still (physically) alive. The worst is the airport - considering he fired all the air traffic controllers and banned them for life. Now we have a pending air traffic controller shortage crisis. :(

The Summitpointe area is also very nice.